Where does the downtown Boston real estate market stand in the housing cycle?
Updated: Boston Real Estate Blog 2022
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In every bust-to-boom cycle in real estate, you can safely state that there are predictable motions that a real estate market goes through, including the downtown Boston real estate market. Some of the stages in the real estate cycle can be skipped and often do.
Let’s view them looking backward and moving forward
AFTER A REAL ESTATE BUST: the early recovery phase of the cycle begins. Despite Boston being one of the largest downtown condo markets in the country, In this phase new home construction will struggle to take off. Builders must execute perfectly on price, location, product, and schools to achieve success. Boston downtown condo builders will worry about state and local fiscal issues and population loss and employment issues, as a result gaining full momentum.
So let’s move on.
In the early expansion phase: Metro area warmed up and are exhibiting more normalized sales and pricing conditions. We upgraded many of these markets from Slow to Normal the real estate recovery finally stabilized and gained traction. The large new Boston Seaport condo price keeps the sales pace moderate for builders.
I would say we’re past the “Ripen recovery cycle”
These big volume markets recovered very slowly, partially because construction is such a big part of their economies. Newly constructed Boston condos for sale have accelerated at a very fast clip—rising over 12% YOY in several downtown Boston real estate neighborhoods. Most of the markets in this group experience Normal market conditions, with Back Bay and Boston Seaport as one of our hottest current markets.
I think when Mayor Menino was in charge of the city of Boston, he prevented or slowed down may new Boston high rise condo luxury projects. However, with Mayor Walsh, full speed ahead. Once again, just look at the transformation of the Boston Seaport District.
In this cycle, you move closer to the exuberance phase. The nearing exuberance markets exhibit Normal current market conditions and have yet to reach the frenzied sales or pricing of the exuberance markets. But the market is not experiencing buyer frenzy overall. Certain submarkets and price points accelerated quickly following a delayed housing recovery. However, sales are still lukewarm in prime downtown real estate locations especially at the higher price points, and the entry segment is now enjoying a strong upward sales and price increases.
Now we are starting to get closer to where downtown Boston real estate market is at. However, based on the last quarterly stats I would have to say that we’ve also past this point in the cycle.
These markets reached the exuberance phase and display hotter housing market conditions through above-average sales rates and price appreciation. Low resale supply (like Beacon Hill and the Boston’s North End) paired with solid job growth is driving additional new home demand, particularly in the relatively affordable price points. The luxury Boston condo market may be closer to maturing exuberance, given significant supply +$1MM, but more modestly priced product (especially in highly desirable submarkets) continues to sell very well.
This is where the debate can begin. Are we at this stage of the real estate cycle? I think we’re beyond this.
The Boston economy is on fire. Technology and finance jobs drive most of the Boston market, and I expect a correction in some segments of the technology sector Many of these maturing exuberance markets were among the first to recover this housing cycle. Current employment is well above prior peak in the downtown Boston market. Strong job growth in the high-wage sectors has buoyed well for Boston Midtown, Back Bay, and Boston Seaport condo markets, but now weakening affordability young professional which decelerating job growth is cooling demand after a sustained run-up.
In summary, downtown Boston real estate markets have in the past has slowed down and recovered at different paces in the real estate cycle. Where we are today? Many factors play into this, stock market fluctuations, uncertainty in the economy both micro and macro. Yes, even the presidential election.
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